Determinants of Demand

The factors that influence or bring the change in demand for a commodity are called determinants of demand. There are various factors that affects the demand for a commodity . The major determinants of demand are as follows .

I. Price of the Commodity (Px) : 

Other things remaining the same, when the price of a commodity falls its demand increases and vice versa i.e. there is inverse relationship between quantity demanded for a commodity and its price, other things remaining the same.

II. Income of the Consumer (Y):

Other things remaining the same, when the income of the consumer falls, the demand for normal goods also falls i.e. there is direct relationship between quantity demanded for s normal goods and the income of the consumer, Other things remaining the same.

III. Price of Related Goods(Pxy):

Two goods are said to be related goods if the change in price of one good changes the quantity demanded for another good, other things remaining the same. When the price of one commodity increases, the demand for another commodity also increases and vice versa, other things remaining the same. Thai is the case of substitute goods like tea and coffee .

When the price of one commodity increases the demand for another commodity decreases and vice versa, other things remaining the same. This is the case of complementary goods like petrol and bike.

IV. Taste and Preference of the Consumer ( T ) :

Other things remaining the same , when the taste und preference the consumer increases, the demand for that quantity increases and vice versa. This shows positive relationship between demand of goods and the taste and preference of the consumer.

V. Advertisement Expenditure (A):

Other things remaining the same , higher the advertisement expenditure for a commodity, highe. the demand for that commodity and vice versa.

VI ) Population size ( N ) :

.Other things remaining the same , higher the population size, the demand for goods and services is also higher and vice versa. 

Vll. Price Expectations ( PE ) :

Other things remaining the same , when the consumers expect the rise in price for a commodity in near future, the present quantity demanded for the commodity increases and vice versa.  

Vlll.  Fashion ( F )

IX.  Weather & climate (W)
X. Customs ( C )

Chapter 2 Part 3